Payroll company ADP confirms its move to downtown Allentown, cites opportunity for growth in Lehigh Valley

A glance at the Fortune 500 company sources say is moving into Five City Center as soon as August 2019.

A glance at the Fortune 500 company sources say is moving into Five City Center as soon as August 2019.

Anthony Salamone and Jon HarrisOf The Morning Call

Fortune 500 payroll-processing company ADP has had a Lehigh Valley presence for more than a decade.

Though it has kept a low profile for most of those years, the company is about to put an exclamation point after its name by taking a giant leap into the heart of downtown Allentown's renaissance.

In a move that could bolster the city’s community and economic development plans, ADP will consolidate local operations and add hundreds of jobs — bringing the total to about 1,600 — to the city as early as the third quarter of next year, according to multiple sources, some with direct knowledge of the company’s plans.

The sources, who are not authorized to speak on behalf of the company, said the move will happen at City Center Investment Corp.’s Five City Center office tower that’s being built at Eighth and Hamilton streets.

Late Thursday, ADP confirmed that it would be moving into Five City Center, though it stopped short of providing specifics about the number of jobs it will bring.

“ADP is pleased to announce that we are opening up a new office in Center City Allentown,” spokeswoman Allyce Hackmann said in an email. “As a result of our continued investment across the Lehigh Valley, we are growing and have made the strategic decision to consolidate our multiple locations in this new Five City Center campus, which is slated to open by September 1, 2019.“

Hackmann also said the new location would provide ADP with the opportunity to continue its growth in the Valley.

J.B. Reilly, president and CEO of City Center Investment Corp., would only say Thursday that an “anchor tenant” has signed a long-term lease to move into most of the 13-story Five City Center. He declined to identify ADP as the tenant, citing a confidentiality agreement.

It’s a key move for the city that has for several years seen its downtown grow, but with companies shuffling workers either in the city or from the Valley suburbs. For example, Lehigh Valley Health Network has moved about 500 workers from office buildings in Salisbury Township to Three City Center at 515 W. Hamilton St. LVHN is now one of Center City’s largest employers. Spokesman Brian Downs said the network has nearly 800 workers in downtown Allentown.

Courtesy image / City Center Investment Corp.

This is a rendering for the proposed Five City Center in Allentown.

This is a rendering for the proposed Five City Center in Allentown. (Courtesy image / City Center Investment Corp.)

ADP, or Automatic Data Processing Inc., is a publicly held company that offers software and services to manage payroll, benefits and time and attendance. The company already has a presence in the area, but its lease for about 80,000 square feet at 7535 Windsor Drive in the Iron Run Corporate Center in Upper Macungie Township is set to expire in fall 2019. Reilly said Thursday that City Center is on schedule to complete Five City Center in August 2019.

ADP already has a taste of what downtown Allentown is like.

Last year, ADP moved into space in The Morning Call building at North Sixth and Linden streets. And it has been subleasing two floors from the BB&T building at Two City Center.

Sources said ADP has been looking to consolidate its Lehigh Valley operations as well as expand — moves it has been undertaking throughout the country.

One source with direct knowledge of ADP’s local plans — who asked to remain anonymous — said the company had been eyeing several cities for its expansion, including Allentown. The company has about 700 employees locally, with most of them in Upper Macungie.

Kurt Zernich, director of asset management at Brookwood Financial Partners of Beverly, Mass., which owns the Iron Run building, said Brookwood could not accommodate ADP’s expansion needs. The 300,000-square-foot Five City Center, offering Class A office space, would be able to.

“They wanted all in one building,” said Zernich, who is also Brookwood’s general counsel. “We don’t have anything of that size [in the Lehigh Valley].”

Five City Center is within the city’s Neighborhood Improvement Zone. Developers in the NIZ can tap their tenants’ state and local nonproperty tax payments, including income tax withheld from employee paychecks, to help pay their construction loans. That allows those developers to offer tenants reduced rents.

Anthony Salamone / THE MORNING CALL

ADP recently opened an office in The Morning Call building along Linden Street in Allentown

ADP recently opened an office in The Morning Call building along Linden Street in Allentown (Anthony Salamone / THE MORNING CALL)

ADP arrived in the Valley in 2006 when it opened a telemarketing center at Iron Run, employing about 50 with plans to expand the payroll to about 250 people within a few years. At the time, ADP officials said they chose Upper Macungie over other East Coast locations in part because of the large number of colleges and universities in the vicinity, and the perception of a strong labor pool. The company also got a state financing package worth more than $1.3 million.

Like ADP’s presence in the Lehigh Valley, the company started small in its corporate beginning and grew to be a giant in the industry.

It started in 1949, when 21-year-old Henry Taub visited a company where, because of an employee illness, the payroll wasn’t done and workers weren’t being paid in a timely fashion. He founded a manual payroll processing service, Automatic Payrolls Inc., in Paterson, N.J., with one client at launch and a $6,000 initial investment.

Today, ADP has a few more clients and quite a bit more money. ADP has now served more than 700,000 clients in 113 countries and found itself at No. 243 on the most recent Fortune 500 list with about $12.4 billion in revenue for its most recent fiscal year, up about 6 percent from a year earlier. Profit also grew 16 percent to $1.7 billion.

One initiative the company is focused on is accelerating the growth of its inside sales organization, positions that involve using a cold-calling strategy and building relationships with prospective clients to recommend ADP products and services to their businesses.

It makes sense that ADP would look to grow its presence in the Lehigh Valley, considering the company has been consolidating its workforce in areas with younger populations and less expensive workforces, according to Colin Plunkett, an equity research analyst at Morningstar who covers ADP.

“I imagine it would be a fair amount of these inside sales people that are being hired in Pennsylvania,” Plunkett said.

An inside sales position at ADP in the area would typically pay $35,000 to $45,000 in base salary annually, with additional incentive compensation tied to performance, a source familiar with the company’s operations said. The company is constantly hiring, the source said, due to a turnover rate in sales of 40 to 50 percent per year.

In its statement, however, ADP says its associate retention levels are higher than the industry average, though it didn’t disclose those percentages.

Local leaders can’t wait for ADP to start hiring.

“The news of a signed anchor tenant for a 13-story building that is approximately a year from completion is fantastic!” Allentown Mayor Ray O’Connell said in a statement. “Businesses are continuing to discover that Allentown is a great place to locate. It is going to result in a lot more foot traffic on the street and that is good for all restaurants and retailers.”

State Sen. Pat Browne, R-Lehigh, who authored the NIZ legislation, said the news verifies that Allentown is “rapidly building a competitive economic platform, which is now attracting some of the world’s most significant commercial interests.”

He said Allentown’s growth has become “a foundation on which you can use to attract significant new investment.”

Nancy Dischinat, executive director of the Workforce Board Lehigh Valley, has heard from NIZ critics who have questioned the growth of downtown Allentown’s employment despite the loss of jobs in the Valley’s suburbs. The announcement of new jobs in Center City would be a “pulsemaker,” she said.

“This is a huge deal for the downtown, a huge deal for the NIZ, a huge deal for traffic,” she said.

Reilly’s Five City Center project, several years in the making, was to include a concert hall, but those plans have been set aside. He wouldn’t say if the decision by ADP directly altered those plans, but he has noted that his company has continued to evaluate uses for its undeveloped properties, including the need to add more residential units to accommodate an anticipated growth in the downtown workforce.

“We continue to hear from national companies that want to grow in Class A office space within a vibrant urban community in order to attract and retain educated employees,” Reilly said Thursday.

Morning Call senior reporter Tim Darragh contributed to this story.

BIGGEST EMPLOYERS

Here is a list of Allentown’s largest employers, as of 2016, with the number of workers in the city.

Lehigh Valley Hospital/Health Services, 3,065

Allentown School District, 2,522

Allied Personnel Services, 2,196

Muhlenberg College, 2,108

Lehigh County, 1,675

ADP, 1,600*

PPL Corp. 1,550

Integrity Staffing Solutions, 1,392

St. Luke's/Sacred Heart Hospital, 1,205

City of Allentown, 1,103

Good Shepherd Rehabilitation, 961

Source: City of Allentown
*The ADP count assumes an estimated number, according to sources.

Property around the world: ADP leases nearly 6.2 million square feet worldwide and owns another 3.5 million square feet

BIG MOVES IN THE NIZ

Here is a summary of major NIZ wins

PPL Center: The $177 million, 8,500-seat hockey arena officially opened in September, 2014. The adjacent 186,000-square-foot One City Center, occupied by Lehigh Valley Health Network, opened in June 2014, while the 170-room Renaissance Allentown Hotel, also connected to the arena, opened in January 2015.

Two City Center: The 11-story, nearly 300,000-square-foot office building opened in March 2014. It is anchored by BB&T’s regional headquarters.

Three City Center: A seven-story, 167,000-square-foot office building opened in May 2015 on the site once occupied by the Colonial Theater on Hamilton Street. Key tenants are Norris McLaughlin & Marcus, LVHN and Morgan Stanley.